Category: Securitization

One of the main reasons many cases do not make it to daylight is because of the failure to allege lack of default. Despite many lawyers knowing that this is the case, and that there is no default, many still fail to make the allegation. On what basis can a lawyer allege lack of default for a homeowner facing foreclosure?

The Note and Security Instrument

The note is not the obligation but evidence of the obligation (for proof of this, in many cases the security instrument refers to the note as the evidence of the obligation). Lawyers usually describe the obligation arising when one party accepts money from another party. The note usually describes who the parties are that are obligated in the section titled OBLIGATIONS OF PERSONS UNDER THIS NOTE. This section of the note states:

If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.

The term “control Fraud” was originally coined by Professor William Black, UMKC. A control fraud essentially starts as a core methodology for the exaction of some enterprise or movement, whether in commerce or at law. The instigators of a control fraud typically have their own self-interests as the motivation for participants to either ignore regulations or laws, or worse yet, to politically pressure or lobby for policy change that suits their agenda(s).

It mattered not that “liar loans”, defective underwriting processes, and securitization obviations were the norm during the run-up to 2008. The control fraud was in place to facilitate complete immunity from prosecution for the big money players at the top of Wall St. Every associated business that derived its income from the mortgage-backed bond sales was expected to follow the guidelines, as set by the fraudsters, or suffer the fate of not working. Everyone from bond insurers, hedge fund managers, realtors and property appraisers had to bend to the poisonous curve…or lose their competitive edge, and thus, their livelihood. When lying becomes the standard upon which your paycheck relies, you are a liar by proxy.

In a recent article published, a staggering statistic was announced about the Gross Domestic Product (GDP) in the United States. Let me preface this by stating that twenty years ago, the financial services industry only contributed 16% of the GDP, while manufacturing, goods and services comprised the bulk of the GDP for the U.S. Meaning that goods were being manufactured, services were rendered and the economy is flourishing because of work product that actually produces something that is consumed, or services that are performed to promote the sale of goods. When money moves through the system, the system is healthy and grows. Conversely, when the system is stagnant and money stalls, the system tries to bury its head and consumers suffer all forms of malady.

Fast forward to today’s reality. The financial services industry now contributes 48% of our nations’ total GDP! Nearly half of what we are “worth” as a nation is derived from an intangible, non-product industry. Let’s examine the cause and effect of this crippling statistic. When Banks and lenders like Washington Mutual, World Savings, Countrywide and their ilk began using Wall St. profits from the sale of AAA rated mortgage-backed securities, then allegedly pooled them into REMIC Trust entities for reporting purposes, a dragon was released with an insatiable appetite for more, more, more.

Well, it has become official, Wall St. is now actively orchestrating the coup d’état. Major firms like Blackrock are setting up shop throughout major metropolitan areas of the U.S. with boots on the ground in an attempt to own and rent/lease properties back to the very souls from whom they stole in the last several years.

Pouring cash assets into the Net Lease Real Estate Investment Trusts seems like a sound business idea, except for one thing…the concept of owning real estate at this time for long term investment purposes does not align with the 20 year long term run-up of property values.

Remember this fact, the investment firms that are playing God with other people’s money don’t really care about the ROI for their investors, all they care about is selling positions or shares or certificates to the investment de jour. So if you invest $100 million in REIT’s but the long term projections for increased valuations of your portfolio have already reached the anticipated high, you are literally putting your money into a pool that pays you back for the use of the money, minus the fees in and out. Not to mention the fact that there is no possible way to project what a given administration’s policies will be in even 5 years. Tax treatments can, and often do, change.

Erobobo: NY Judge rules ownership of note is burden of the banks. Not standing but rather capacity to sue without injury.

SEC Orders Credit Suisse to disgorge illegal profits back to investors. Principal balances of borrowers may be reduced. Defaults might not exist because notices contain demands that include money held by banks that should have been paid to investors.

But these decisions are so interrelated and their effect so far-reaching that it seems to me that if you read only one of them you might head off in the wrong direction. Pay careful attention to the Court’s admonition in Erobobo that these defenses can be waived unless timely raised. Use the logic of these decisions and you will find more and more judges listening with increasing care. The turning point is arriving and foreclosures — past, present and future — might finally get the review and remedies that are required in a nation of laws.

Back in high school, we all had to run the short race that was a flat out sprint. More injuries occur in the shorter races than do in the races of duration for one simple reason…it places a higher impact on all muscles in the shortest amount of time, and with sometimes career ending results.

The recent run-up in housing prices, spurned by dog-fights at the auctions between private home buyers and investor money looking for another “bargain”, is a red herring. REO properties and direct sales in the short sale and traditional MLS (Multiple Listing Service) listings are now seeing one of the first signs of a healthier economy. Or so says the Real Estate industry. The numbers do not lie, however, there is a lot of activity to be sure, as compared to even one year ago, but this is a short race, so tape up and stretch.

Two Oregon Supreme Court Rulings came out yesterday relating to Mortgage Electronic Registration Systems, Inc. The first was Brandrup v. ReconTrust Co. (June 6, 2013), and the subject of this post, which is Niday v. GMAC Mortgage LLC, et al. (June 6, 2013).

Note the following quotes from this ruling:

That is so because, on the present record, MERS’ involvement in the appointment of the current trustee casts doubt on the trustee’s status.

and

But, appointments of a successor trustee may only be made by the trust deed beneficiary, ORS 86.790(3), and, as discussed, MERS is not, and never has been, the beneficiary of the trust deed for purposes of the OTDA.

The decision of the Court of Appeals is affirmed. The judgment of the circuit
court is reversed, and the case is remanded to that court for further proceedings.

Kistler, J., concurred in part and specially concurred in part and wrote an opinion
in which Balmer, C.J. joined.
*Appeal from Clackamas County Circuit Court, Henry C. Breithaupt, Judge. 251
Or App 278, 284 P3d 1157 (2012).

The Oregon Supreme Court was asked four questions, and answered as follows:

We accepted the district court’s certification and allowed the parties in the federal cases to
present their views. We answer those questions — in two instances as reframed — as
follows:

(1) “No.” For purposes of ORS 86.735(1), the “beneficiary” is the lender to whom the obligation that the trust deed secures is owed or the lender’s successor in interest. Thus, an entity like MERS, which is not a lender, may not be a trust deed’s “beneficiary,” unless it is a lender’s successor in interest.

(2) We reframe the second question as follows:
Is MERS eligible to serve as beneficiary under the Oregon Trust DeedAct where the trust deed provides that MERS “holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests”?